The BRICS summitLacking mortar

THE BRICS summit held in Durban these past two days completes a full cycle. Brazil, Russia, India, China and now South Africa, the Johnny-come-lately of the group, have each taken a turn in hosting the developing-nation pow-wow. The Durban meet was supposed to mark the graduation of the BRICS from a mere acronym—coined by Jim O’Neill of Goldman Sachs to link four populous emerging markets, South Africa not included—to a grown-up force with its own institutions. Did it do so?

Not quite. There had been speculation in the weeks leading up to the talks that a BRICS development bank, with $50 billion of capital, would be established to help finance long-term spending on infrastructure. This was supposed to be the first BRICS institution and thus a milestone to making the group a serious rival to the G8, a rich-world talking shop. But the steps taken at Durban were more modest than many had hoped.

A report by the financial brass of the five nations said a BRICS development bank would indeed be “feasible and viable”. And their leaders endorsed the idea of such a bank in principle. But there was no agreement on the amount of capital the bank should have. That would only beg the question of who stumps up for it. A $50 billion bill split equally five ways would be easier for some members ($10 billion is cab fare for China) than for others. South Africa was said to be pushing for a firm figure: it is the economic minnow of the five, so had most to gain. In the end the BRICS could only agree that the bank’s capital should be “substantial”.

In contrast, the tentative step taken towards pooling the BRICS foreign-currency reserves came with a figure. A safety net with an initial size of $100 billion would be “feasible and desirable”, said the communiqué—as long as there were the right “legal frameworks and appropriate safeguards.” At least four of the five BRICS countries have ample currency reserves; the issue was whether and how to lend them to other, cash-strapped emerging economies. The frameworks and safeguards to make this work might not be all that feasible or desirable. On this evidence the IMF is likely to remain the world’s lender-of-last-resort for a while.

There will be an interim BRICS meeting when the G20 group of rich and soon-to-be-rich countries gathers in Russia in September. The next full BRICS summit will be held in Brazil in 2014, the year in which the country hosts the FIFA World Cup, the granddaddy of all football tournaments. Perhaps Rio or Sao Paulo will see the full graduation of the BRICS as a global force. The Durban summit did not quite make that mark.